The Pacific Agreement on Closer Economic Relations - Plus (PACER-Plus) agreement between Australia, New Zealand and 12 Pacific Island countries was finalised in Brisbane in April 2017. PACER-plus negotiations began in 2009 with 14 Pacific Island countries involved in the talks. The deal was signed on June 14, 2017, but the two largest economies, Papua New Guinea and Fiji , representing 80% of the combined GDP of Pacific Island countries, did not sign. Both have said the agreement threatens their infant industries and would not benefit their economies.
PACER Plus was tabled in the Australian parliament in November 2017 and was reviewed by the Joint Standing Committee on Treaties which reported on May 9, 2018. Community groups made submissions recommending against implementation, pending independent assessments of the economic, environmental , health and gender impacts of the deal in Pacific Island countries. See the AFTINET submission here and the Committee Report here. The report admitted that he absence of Fiji and PNG greatly diminished its significance, that the main benefits would flow to Australia and New Zealand and that rapid removal of tariffs and services deregulation could harm small and vulnerable Pacific Island economies.Despite these admissions, the report recommended that the implementing legislation be approved. See AFTINET analysis here..
PNG and Fiji’s rejection shows that the PACER-plus agreement is heavily skewed towards the interests of Australia and New Zealand, who want lower tariffs for their exports and more rights for foreign investors. This is despite early rhetoric that the agreement was about the development needs of Pacific Islands.
AFTINET is concerned that the smaller island economies have less negotiating power than Fiji and PNG and may have been pressured by the Australian and New Zealand governments into signing a deal which does not benefit them.
Many of these are small and vulnerable economies facing many challenges, and any regional free trade agreement that covers trade in goods, services and foreign investment needs detailed research to measure the impact of trade liberalisation. Yet very few studies have looked at the effect of PACER-Plus on specific industries.
The negotiations were conducted in secret, making it very difficult for civil society organisations and Pacific Island communities to make a meaningful contribution to the process. However, leaked documents did reveal many issues of concern to Pacific Island civil society groups, and the Pacific Network on Globalisation published a 2016 report, Defending Pacific ways of life: A People’s Social Impact Assessment of PACER-Plus , and a 2017 Peoples' Guide to PACER-Plus.
Loss of revenue for Pacific Island nations
Pacific Island countries already have tariff-free access for their goods in Australia, so PACER-plus provides no extra market access. The main purpose of PACER-Plus is to reduce tariffs on Pacific Island imports from Australia and New Zealand and to reduce the ability of governments to regulate foreign investment in services and other sectors.
Tariff reductions would lead to significant revenue losses for smaller Pacific Island countries, and it is unclear how these losses can be offset. This could impact on the ability of these governments to provide essential services to their populations. Many Pacific Island governments are already struggling to provide public services like health, education, water, police and emergency services.
One option is to implement Value Added Taxes (VAT) as a replacement for tariffs. However, the International Monetary Fund concluded that developing countries that implement VAT only collect 30 per cent of the revenue they previously received from tariffs.
Trade in services rules could reduce governments’ ability to regulate in the public interest
PACER-plus trade-in-services rules could create pressure for privatisation and reduce the ability of governments to regulate to provide equitable access to essential services for vulnerable populations.
- AFTINET analysis of JSCOT report
- AFTINET JSCOT submission
- People’s Guide to PACER-plus (PANG, April 2017)
- PACER-Plus trade deal without PNG and Fiji a bad idea (AFTINET, April 2017)
- Defending Pacific ways of life: A People’s Social Impact Assessment of PACER-Plus” (PANG, 2016)
Updated: March 2018